But there are two major issues with the stimulus. First, Senate Minority leader Chuck Schumer said the proposal is not likely to be met. Second, Zandi says the negotiation might take longer than expected.
Zandi, who said the currently-talked about stimulus plan is too small, said:
It has to be well-designed, effective support… That means aid to state and local governments, additional support to the folks that are unemployed, another round of stimulus checks and also some more help for getting schools open and helping those health-care workers.
The Moody’s economist further noted that the Republicans and Democrats might wait for the “last-minute” because “they always do.”
In the near-term, economists say that additional job losses are inevitable. Zandi said the absence of a “very large” stimulus package would trigger a spike in jobless claims. He said:
But by August or September, if we don’t get a very large support package from lawmakers, I think we’ll see some outright job losses.”
The markets have rallied since March as a result of direct stimulus payments and the $600 unemployment benefits.
Consequently, retail sales rose, and consumer spending was higher than analysts expected.
Strategists say that the end of the $600 unemployment payments could put millions in a difficult position. When that coincides with a rise in jobless claims and virus cases, the stock market uptrend could slow down.